Tag: Sales Insights

One of the most important metrics for firms looking to grow effectively is the marketing-to-sales ratio (M:S ratio). This metric helps align your marketing and sales efforts by quantifying how much you’re investing in generating revenue. Whether you’re scaling a startup, optimizing a mature business, or navigating a new market, understanding and calculating this ratio can significantly impact your bottom line.

What Is the Marketing-to-Sales Ratio?

The marketing-to-sales ratio is the percentage of your total revenue that you invest in marketing. It measures how much money your business spends on marketing for every dollar of sales generated.

Formula:

M:S Ratio=(Revenue/Marketing Spend​)×100

For example:

• If your annual revenue is $1 million and you spend $100,000 on marketing, your M:S ratio is 10%.

Why Does the Marketing-to-Sales Ratio Matter?

• Budget Allocation: Helps to ensure you’re investing enough in marketing to drive sales growth without overspending.
• Benchmarking: Provides a way to compare your spending against industry standards and competitors.
• Performance Insight: Highlights how efficient your marketing efforts are in generating revenue.
• Scalability: Guides you in scaling your marketing spend proportionally to revenue growth.

How to Calculate Your Marketing-to-Sales Ratio

Determining your M:S ratio involves a few simple steps:

Step 1: Define Your Marketing Spend

Include all costs related to marketing, such as:

• Paid media (Google Ads, social ads, etc.)
• Marketing technology (CRM, email platforms)
• Content creation (blogs, videos, design)
• Agency fees or outsourced services
• Event sponsorships and trade shows
• Internal marketing team salaries

Pro Tip: Be consistent with what you include as “marketing spend” to ensure accurate comparisons over time.

Step 2: Calculate Total Revenue

Use your gross revenue figure for the time period you’re analyzing (e.g., monthly, quarterly, or annually).

Step 3: Apply the Formula

Divide your marketing spend by total revenue and multiply by 100 to get your percentage.

Example:

• Marketing Spend: $150,000
• Annual Revenue: $2,000,000

M:S Ratio=(2,000,000/150,000​)×100=7.5%

Your M:S ratio is 7.5%.

What Is a Healthy Marketing-to-Sales Ratio?

The ideal ratio varies depending on your industry, business model, and growth stage. Here are some general benchmarks:

• Early-Stage Startups: 10–20% (high investment to fuel growth and brand awareness)
• Mature Businesses: 5–10% (steady-state growth with optimized spend)

Note: These benchmarks are not one-size-fits-all. Consider your specific goals and market conditions.

How to Adjust Your Ratio

Your M:S ratio should align with your business goals. Here’s how to interpret and adjust your ratio:

1. High M:S Ratio (>15%):
   • Likely indicates heavy investment in marketing.
   • Works well for startups or businesses launching new products.
   • Consider whether your spending is driving proportional growth.
2. Low M:S Ratio (<5%):
   • May indicate underinvestment in marketing, potentially stalling growth.
   • Focus on increasing marketing spend strategically, particularly in high-ROI areas like digital advertising or SEO.
3. Balanced Ratio (5–15%):
   • A good starting point for most businesses.
   • Continuously monitor and refine based on ROI.

How to Evaluate Marketing ROI Against Your Ratio

Having a healthy ratio is only part of the equation. You also need to measure the effectiveness of your marketing spend:

• Cost Per Lead (CPL): How much does it cost to acquire a new lead?
• Customer Acquisition Cost (CAC): How much does it cost to acquire a new customer?
• Lifetime Value (LTV): Does your customer value exceed your acquisition costs?

By tracking these metrics, you can determine if your marketing spend is generating a healthy return on investment (ROI).

Tips for Optimizing Your Marketing-to-Sales Ratio

1. Start with Clear Goals: Define your revenue and customer acquisition goals before setting your marketing budget.
2. Invest in High-ROI Channels: Prioritize tactics like SEO, email marketing, and paid ads that consistently deliver results.
3. Scale Proportionally: As your revenue grows, ensure your marketing spend scales with it.
4. Leverage Automation: Use tools like marketing automation platforms to reduce inefficiencies.
5. Test and Refine: Continuously test campaigns to find the optimal spend for your target audience.

M:S Ratio: A Balancing Act

Use your marketing-to-sales ratio as a strategic tool to balance marketing investment and firm growth. By calculating and optimizing this ratio, you’ll gain better visibility into how your marketing efforts contribute to revenue and ensure you’re spending wisely to meet your objectives.

Are you tracking your M:S ratio? Let us know your biggest challenges or wins in aligning marketing spend with revenue goals!

Nope, not clickbait. This is a real breakdown of the underlying reasons why you’re frustrated with your marketing efforts. We see it all the time – a business invests heavily into a marketing lead funnel, but then months later wonders why the results aren’t better.

This undoubtedly raises concerns that marketing efforts could be falling short. (Let the finger pointing begin.) Before executives make decisions, metrics are splashed out on the table, lead funnels are examined, and sales teams are questioned. At the end of the circus comes a conclusion: it must have been the marketing. [Que theatrical sting: ‘Dun, Dun, Dun.’]

Despite all this, your rockstar marketing team continues to report phenomenal metrics on click-throughs, new engagement requests and booming web traffic. It looks like they’re KILLING IT. But if the business is still missing its revenue goals, something is clearly amiss. Is marketing really to blame? Maybe.  But maybe not – here’s how you can tell.

The Marketing ROI Dilemma

Here’s my favorite conversation: “How do I measure the value of marketing?” Rightfully so, executives want to understand the cost-benefit analysis. Do the results surpass the outlay enough to justify the expense not only in dollars, but also in the production hours and opportunity cost? To answer this effectively, we need to return to the initial goal and the processes that were supposed to get us there.

This question must be asked relentlessly from beginning to end of any campaign. But here’s the reality: most firms are doing it backwards. They set out with high hopes, run like crazy to execute, and then a few months later they review the results. This doesn’t work for a variety of reasons.

Marketing, more so than most departments, also relies heavily on other teams to properly execute strategies. Even with a suite of allies, a marketing leader requires that A, B, C, D, and E and F, all happen in complete harmony.

Marketing’s Allies:

• C-Suite
• Customer Service
• Product Development
• Public Relations
• Sales
• Technology

Even assuming the processes and teams are working well together, it doesn’t mean there’s not a greater underlying issue hindering your revenue performance. It’s time to dig deep.

Maybe You’re Asking the Wrong Questions

Marketing isn’t a band-aid, it’s a central component to driving company profits. If you’re relying on marketing to fix a broader, underlying issue…keep reading.

Used effectively, marketing procures qualified leads and delivers them (piping hot) to sales leaders. In order for that to happen though, a number of factors need to occur in constant, synchronized succession. So before you throw out your existing marketing strategies, executives should consider where else challenges may exist in your product, technology, sales and customer service processes.

Hey, There’s a Hole in Your…

Shoring up these gaps now is essential to quantifying your marketing efforts later. Turning on the lead flow will only temporarily mask your larger problem. Before greenlighting your marketing strategy, you’ve got to understand the factors that could hinder its success. Kick-off your intentional marketing campaign only once you’ve reviewed the entire process, asked the hard questions, and believe that the only thing between you and increased revenue streams is a need for customers to be more aware and willing to purchase your products or services.

Just what the [#$%&] is going on?

Consider these common scenarios:

• Leads are going stale in the funnel.

Despite driving qualified, ready-to-purchase prospects into the sales cycle, there’s a lag in capturing revenue. This could show up more obviously in longer close times, but also with minimal notes in your CRM, fewer sales calls, poorly written follow-up emails, or a variety of other sales issues that essentially stack up to improper training. No amount of leads from marketing will solve the problem of an ineffective sales process or team.

• Product is missing a competitive advantage.

In an industry facing rapid expansion, businesses need to be evolving their product to serve the growing consumer demand. If you aren’t focused on constant improvements and investing in growth, know that your competitors are gaining the upper hand. Marketing can bolster your messaging and attract more eyeballs, but if the product itself can’t stand on its own, there’s nothing marketing can do to hide its flaws.

• Ineffective dashboards and integrations.

Marketing has become far more scientific over the past decade. With all key technologies linked behind the scenes (from content platforms, to social media, to CRMs) there are dozens of metrics that can be created to monitor performance across activities within your firm. When these integrations and dashboards break, or never exist in the first place, it becomes more like a guessing game. Not investing here is a sure way to set your sales and marketing teams up for failure. If this is a gap in your current processes, resolving it should take immediate precedence. You can’t optimize what you can’t measure. 

• Capacity constraints are hindering performance.

Especially today, our industry is not immune to the national talent shortage. If you’re seeing weak metrics from any department, consider if this is a talent issue. Are the right people in the right chairs, and if so, are they overcompensating for a larger issue? This could present in ways such as, a department that previously performed well is now missing their goals, your customer service team is hearing more complaints than usual, your CRM is showing the same volume of activity yet fewer leads are closing. The list goes on…but until you solve the capacity constraint, you will not see improvement in your bottom line.

• Poor or confusing client experience.

Do you know what it’s like to be a client of yours? If it’s been awhile since you mapped your client experience, you may be surprised at what you find. As businesses grow, their services typically evolve, and with this often come temporary bridges. The problem with temporary bridges is that they become permanent and then overlooked as new challenges present themselves. Revisiting your client experience may uncover some reasons that prospects and clients are falling out of love with you. Some of these findings will have easier solutions than others. Marketing can help adjust messaging and positioning, but ultimately won’t move the needle until your processes are reconfigured to meet the demand for the size of your firm today.

 Prove it.

Before, during and after your campaigns, marketing leaders and executives can track progress by reviewing a few key metrics. The best and most reliable way to stay on top of this is through dashboards and reports. Executives should ensure these are set up in advance to build a baseline, and then continue to leverage these for insight as the campaign unfolds.

Whenever there is concern over whether marketing is performing as intended, step one should always be reviewing the agreed upon marketing metrics. When those appear to be in order, yet the firm is still missing its financial marks, it’s time to look more broadly at the products, processes and people across the organization.

In marketing communities, on podcasts and at conferences, one topic is always on the agenda: Sales and marketing alignment.

 

Up until recently, it wasn’t something I spent a lot of time thinking about. In my time as a marketing leader, I’ve always been lucky enough to work at companies with phenomenal sales leaders.

 

• They made smart hiring decisions.
• They knew where marketing ends and sales begins. 
• They were driven by the right metrics.
• They understood that in order to succeed, both sales and marketing strategies need to evolve with the way customers want to learn and buy. 

 

Perhaps most importantly, if either side recognized areas that needed improvement, it was mutually understood that the lines of communication were always open—and that solving problems together was a top priority. 

 

Because of that, my marketing teams have always been able to work in lockstep with sales to drive sustainable, long-term growth.

 

I’m learning that this is the exception, not the rule.

 

Acting now as a growth consultant for fintech and finserv firms, I see companies dealing with wild misalignment between the two teams, and between the two team leaders. 

 

But just because not every marketing leader has been as lucky as I’ve been (and I think my former sales counterparts would say the same), that doesn’t mean that creating alignment between sales and marketing is a lost cause. 

 

It can be done. The problem is, it takes work—a lot of it—from both sides. It requires rethinking old processes. It requires changing mindsets. In some cases, it may require a structural overhaul. 

 

If you’re a marketing leader who wants to create more cohesion between the sales and marketing functions at your company, read on (but with this caveat: Not every business is ready for the framework I’m suggesting. If yours isn’t, you’ll always be fighting an uphill battle).

 

Here are the truths I’ve learned about aligning sales and marketing:

 

The CRO role is a band-aid. Let’s get this out of the way first: Sales and marketing teams should be led by two different people. 

In theory, perhaps it makes sense to bring marketing and sales together under a Chief Revenue Officer. They’re working toward a common goal, after all—shouldn’t unifying the functions create more alignment?

In reality, most CROs are former heads of sales who know little about modern marketing. 

The head of marketing needs to deeply understand the role marketing plays in driving revenue, strategically and tactically, in order to hire the right people, make decisions, adjust campaigns that aren’t performing, optimize content creation and distribution, develop messaging—the list goes on. Most CROs aren’t qualified to do any of that. So when the CRO, a former head of sales, is in charge of marketing, marketing teams become glorified order takers from sales.

I’m not picking on sales leaders here, by the way. Marketing leaders are equally unqualified to run sales teams. It would be difficult for a CMO to understand the nuances of effective one-to-one cold outreach and follow-up, the art of giving demos tailored to different people’s needs, the stamina long sales cycles require and the psychology of selling.   

 

Respect is the foundation for success. That brings me to my next point, which is that not only do sales and marketing leaders need to respect each other as people, but they need to respect the role each team plays in driving results for the company.

And respect begins with understanding. Marketing and sales should be led by two different people, but they can’t exist in siloes. Having deep empathy for what the other team does will change behaviors for the better.

 

Both teams need to agree on goals and SLAs. When sales and marketing teams have respect and empathy for each other, they set goals that are realistic and achievable. 

Beginning at the top with revenue, the leaders of both teams should work together to define the marketing and sales metrics necessary to build a full funnel from contact to close.

That also means collaborating on the SLAs that directly impact revenue goals. For example, sales will call qualified leads within 5-10 minutes of receiving them from marketing, if marketing nurtures leads to the point that sales can expect a contact rate of 25%+ on those calls.

 

Defining ‘Qualified’ will save the relationship. The key word in my previous point is ‘qualified.’

There’s no faster way to drive sales and marketing misalignment than to send sales a bunch of leads with low to no buying intent. This goes back to empathy, which I mentioned earlier.

Imagine if marketing teams had to follow up with every person who downloaded an ebook? They’d stop passing those leads over to sales pretty quickly.

On the flip side, when sales handcuffs marketing to a fraction of their potential target audience because some segments require extra legwork to close, they make it more difficult for marketing to reach their goals. 

Coming together to define what makes a prospect ‘qualified’ will save both teams time, frustration and bad blood. When I say qualified, I mean both fit and intent:

The prospect is firmographically in the company’s ICP.

The prospect has shown intent to buy—meaning they’ve asked to see the product or speak with a sales rep.

Together, sales and marketing can identify where prospects with the fastest close rates typically come from and what their similarities are, including challenges they’re facing and objections to purchase. That information is gold for marketing teams, who can then optimize those high-performance channels and tailor messaging to speak to prospects most likely to close.

 

It’s everyone’s job to understand the market. Sales and marketing leaders must have an understanding bordering on obsession about their target customers:

• What do they need most?
• What are their biggest challenges?
• Where does the product or service fit into their lives?
• What language do they use?
• Where do they spend their time—digitally or otherwise?
• How do they prefer to make buying decisions? 

The customer is always most important. When sales and marketing leaders put the customer first, they organically do the right things. 

Both leaders also need to understand where their product or service fits into the competitive landscape. What existing gaps does it fill? What truly makes it unique? What are common purchase objections? What do customers know that prospects don’t, and how can marketing close that gap?

 

Problems require collaboration, not blame. Marketing and sales have long been each other’s scapegoats when goals aren’t being hit. Sales blames marketing for bad leads. Marketing blames sales for not being able to close deals. And no one gets any closer to actually reaching revenue goals.

But success never runs exclusively up and to the right. Sales and marketing leaders should anticipate that underperformance is occasionally going to happen, and put processes in place to identify, together, why the problems exist and how to fix them.

For example, what are sales people consistently hearing on calls? Is there a gap in the product or service that needs to be addressed?

Is marketing noticing a dip in engagement rate on a certain platform, or is new messaging not resonating with the market?

Are there trends in churn rate that can be analyzed? Perhaps a certain segment of the market actually isn’t a good fit.

When marketing and sales leaders work together to correct problems, their teams can better execute their individual, but complimentary, roles.

 

Marketing needs to create demand. Only about 2% of any addressable market is in a buying cycle at a given time. And that’s exactly who most marketing teams prefer to focus on, fighting with competitors at the bottom of the funnel over the small number of buyers actively ready to make a purchase.

But the real power of marketing is in driving awareness to the other 98%—by educating, creating communities, flawlessly executing campaigns, optimizing organic communication channels and outthinking the competition—so that when that larger portion of the market is ready to buy, there’s only one brand they think of.

 

Sales needs to capture demand. I’ve said it before and I’ll say it again—when marketing is done well, sales becomes easier.

But that doesn’t mean sales becomes easy. Sales needs to carry the demand marketing creates across the finish line, which means: 

• Executing flawless prospect outreach and follow-up
• Knowing the product or service better than anyone else in the company
• Being able to tailor demos, calls and proposals to the specific challenges of the businesses they’re pitching 
• Understanding, and being transparent about, how every feature or solution stacks up in the marketplace

 

Creating marketing and sales alignment is hard work that requires both commitment and an ego check from both sides—but the results are worth it. If your growth teams’ relationship could benefit from an outside perspective, get in touch and we’ll get to work!